This series of posts is about enabling sustainable businesses on the App Store. In Part 1, I discuss why Paper and other productivity apps may not be doing as well as you might think. Part 2 explores why casual games, in contrast, are a sustainable business, but not a differentiator for platforms (I added a follow-up here). Part 3 analyzes why Apple in particular seems hesitant to enable sustainable businesses on the app store.

The opportunity is there for mobile game makers who can strike the right cord with their audience. Mobile game sales are expected to ring in at more than $9.9 billion this year, up 13.5% from the $8.8 billion spent in 2012, according to market researcher PwC…

The company’s leading game, “Candy Crush Saga,” was launched on Facebook in April 2012. It is the most popular app on Facebook, with an estimated 15.4 million average daily users as of the most recent figures, according to AppData, an independent firm that tracks online activity.

“Candy Crush Saga” has also been one of the most frequently downloaded free apps via the iPhone and Google Play, according to App Annie, which tracks app store purchases. It is also among the highest grossing apps on iPhone and Google Play when users’ in-game purchases are considered, App Annie figures show.

Stories like this, along with the $10 billion dollars Apple has paid to developers, would seem to be the obvious counterpoint to my app store pessimism.

It’s games like Candy Crush Saga – free, with in-app purchase – that are fueling much of that $10 billion. According to App Annie1, for the iPhone:

95 out of the top 100 grossing apps feature in-app purchase

79 out of the top 100 grossing apps are free to download

The numbers are broadly similar on Android, with an even sharper skewing towards free: 96 out of 100 of the top 100 grossing apps are free to download.

There are some important implications here for both Apple and app developers:

New monetization options can enable sustainable businesses built on the app store

Apple allowed in-app purchases in free-apps in October, 2009. You can draw a direct line from that policy change to King’s IPO. For those who love apps, this is great news: it is possible to build a sustainable business on the app store, if the right policies and mechanisms are in place.

In the case of in-app purchase, a monetization mechanism built directly into gameplay is a powerful driver of purchase, allowing developers to make money from their existing customers. That is the key to a sustainable business.

Only games can build a business on in-app purchases

Unfortunately, building a sustainable business on in-app purchases requires an infinitely available good. For example, in Candy Crush Saga, if you die five times on a level, you can’t try again for 30 minutes. Unless, of course, you’d like to buy 5 more lives for $0.99. Providing those five lives entails nothing more than resetting a counter.

Casual games do not differentiate app platforms

Candy Crush Saga was originally a web game, then a Facebook game, and was later ported to both the App Store and Google Play (it’s the top grossing app on both). In fact, cross-platform play is one of its selling points:

King.com kept the game near identical across all platforms, with a similar map screen, leaderboard, UI and more as well as letting the player carry their game progress across all platforms.

“It’s a great customer experience,” says Dave Rohrl, vice president of game production at Goko. “You can experience the game when, where and how you want. This lets players interact with your game a lot more, which ultimately increases their engagement and monetization.”

That’s great for King – more potential customers, and more opportunities for monetization – but it’s not something Apple (or Google) should feel particularly special about.

Unlike the PC wars, I don’t think casual games will prove to be much of a differentiator between the various platforms for a few reasons:

Games take over the whole screen; this means that tailoring a game to fit a particular platform’s look and feel isn’t important

There is an entire industry devoted to providing cross-platform compatibility from day one. Most game developers are targeting game engines such as Unity, not iOS or Android. This is acceptable because of point one

Games are much more likely to be faddish; how many of you are playing the same games you were three months ago, much less three years ago?

Net: no one is buying (or not buying) an iPhone or Android device because of Candy Crush Saga, or any other casual game.

Thus, from a strategic perspective, that $10 billion is not nearly as impressive as it looks, especially since in-app purchase has unlocked revenue for Google Play developers as well. Any discussion of Apple’s app moat should first discount the entire casual game genre.

This is a three-part series on enabling sustainable businesses on the app store.